Centre orders SFIO probe into Global Trust Bank

The corporate affairs ministry, which had ordered technical scrutiny of the books of GTB by the Registrar of Companies earlier this month, has “prima facie found evidence of fund diversion, serious financial irregularities and accounts manipulation by the management,” official sources told PTI.

“The Serious Fraud Investigation Office (SFIO) has been asked to submit its report on the enquiry into GTB within three months and six officers have been designated for the probe,” according to an official.

The SFIO probe, the official said, would be carried out under Section 235 of the Companies Act under which the investigating agency can call for information or explanation from a company. The GTB matter dates back to 2004 when the bank collapsed following reckless lending to entities associated with the Ketan Parekh stock market scandal. GTB became sick due to mounting bad debts of over Rs 1,400 crore and was later taken over by Oriental Bank of Commerce in 2004. When asked, what prompted the MCA to intiate a probe after six years of the bank’s fall, a senior official said the finance ministry had been repeatedly asking it to scan the role of the management in the scam.

GTB had commenced operations in 1994 after RBI granted licence to former ADB executive Jayanta Madhab. Ramesh Gelli was the Chairman and Managing Director of the bank, while Sridhar Subasri served as Executive Director.

Earlier, investigations by various agencies like RBI and Sebi have revealed that GTB had taken high credit exposure in certain accounts exceeding exposure norms prescribed by the Reserve Bank. The RBI study of non-performing assets of GTB had revealed that bank camouflaged its position of bad assets by making fresh loans to allied concerns including some of the front companies of Ketan Parekh.